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The Ultimate Guide to Mechanic’s Liens for Subcontractors

Mechanic’s liens are legal claims meant to protect contractors and subcontractors from not getting paid on construction projects. The nature and rules of mechanic's liens can be complicated and confusing. Subcontractors often have a lot of questions about how these liens work, when their company should use them, and if they’re effective at securing payments. 

This article will cover everything you need to know about mechanic’s liens, including:

  • The basics of mechanic’s liens
  • Whether or not they’re effective (and why)
  • General tips to keep in mind
  • How to file a mechanic’s lien
  • What to do after you file a mechanic’s lien

Basics of Mechanic’s Liens

What is a mechanic’s lien?

In the simplest terms, a mechanic's lien is a legal tool used by contractors and subcontractors to make sure they get paid for work completed on a construction project. 

Filing a mechanic’s lien says that: 

  • you’re owed money for services provided,
  • you demand payment by a specific date, and
  • if you don’t receive payment by that date, you intend to move forward with legal proceedings to collect that payment from the value of the property.

How does a mechanic’s lien work?

Mechanic’s liens are essentially a security interest in the title of the property. But they’re not like most security interests where the debtor offers up the title as collateral on a loan. The debtor (i.e., property owner) doesn’t have to agree to a mechanic’s lien at all. They don’t even get notified of the lien filing until after it’s granted. This is why some people refer to it as an “involuntary security interest.” 

Once a mechanic’s lien is filed, the property owner can’t sell or refinance the property until the debt is settled.  

When you file it, you’re stating that if you don’t receive payment, you will proceed with litigation. You effectively have the right to force the sale of a property to get paid. 

Mechanic’s liens exist in every state, but each state has different legal requirements. They apply to almost any commercial or residential construction project. They do not apply to public projects, and requirements vary when it comes to multi-unit housing projects. 

Who can file a mechanic’s lien? 

Nearly everyone involved in a construction project can file a mechanic’s lien if they don’t get paid for services, labor, or supplies they provided for the project. 

Contractors and subcontractors, architects and engineers, and even material suppliers and equipment lessors can all file liens when they follow the state requirements where the property is located. (Although when a supplier files the lien, it’s often called a materialman’s lien; when a design professional files one, it may be called an artisan’s lien.) 

So it doesn’t matter if you pour foundations, install the electrical wiring or plumbing, or are responsible for the finishing touches—you have lien rights to ensure you get paid for your work. 

Reasons Mechanic’s Liens are Effective

Unfortunately, it can take a long time to get paid in construction—and subcontractors are often lower on the priority list. It’s not uncommon for payments to take months to arrive. 

As a subcontractor, you can take a few approaches to collect money owed. You can continue sending demand letters. You can file a breach of contract claim and try to resolve it through collections, arbitration, or litigation. You can negotiate joint check agreements, promissory notes, or personal guarantees. Or you can take the most effective route and file a mechanic’s lien. 

There are a few big reasons mechanic’s liens are so successful at collecting payments. 

  • A lien ties up the property. The owner can’t sell, refinance, or transfer it without paying you.
  • If the GC or owner can’t afford to pay you, you can collect the money you’re owed from the value of the property. 
  • Liens get everyone’s attention—the property owner, the lender, and even the lawyers. Typically, the people at the top often aren’t aware there’s a problem with payment. But everyone takes note when they catch wind that a lien has been filed.
  • Almost every construction contract contains a clause that the property must be kept free of liens. So when you file a lien, it causes a breach in every open contract. 
  • The alternatives to paying a lien are expensive. Most owners would rather pay you than deal with that headache. 
  • If the debtor files for bankruptcy, a lien puts you toward the top of the list of creditors, giving you a higher likelihood of getting paid.

Things to Remember about Mechanic’s Liens

Before we get into how to file a mechanic’s lien, there are a few general tips to keep in mind. 

  • Your lien must be filed within a defined timeframe. This timeframe is determined by the state’s guidelines where the property is located. Some states calculate the deadline based on the project’s completion date. In others, it’s based on when you completed your work (otherwise known as your last furnishing date). 
  • Liens do expire. And in some states, they expire quickly. 
  • If filing your lien doesn’t prompt payment, you’ll have a finite time frame to foreclose on it. This ranges anywhere from 90 days to six years, depending on the property’s state.
  • Filing a mechanic’s lien is more than just filling out a form. It’s a multi-step process.

Mechanic’s Lien Process

As we said in the beginning, mechanic’s liens can be complicated. There are several steps you must take to be able to file a mechanic’s lien. (Keep in mind that the first two steps aren’t last-resort actions. We recommend you incorporate them into your standard billing practices.)

1. Preliminary Notice: Sometimes referred to as a notice to the owner or a notice of furnishing, depending on your state. 

You should always send a preliminary notice at the start of the project to inform the property owner, GC, or any other parties with financial interest in the property, that you’re involved in the project and you have a right to file a lien if you’re not paid for the services you provide. This is an essential step in securing your right to payment. 

Thirty-four states require subcontractors to send a preliminary notice to keep their lien rights. Some states only require it for certain types of projects or contracts exceeding a certain amount. (This 2017 resource from LevelSet provides an overview of the states that require a preliminary notice, but double-check your state’s official statutes for the most up-to-date requirements.

2. Notice of Intent to Lien (NOI): Sometimes called an intent notice or notice of non-payment.

This is your final warning before filing a lien. Filing an NOI says you intend to place a lien on a property if you don’t receive payment within a specific number of days. They work similarly to a demand letter but catch the attention of property owners. 

Only a handful of states require an NOI, but they can be an effective way to generate payment without actually filing a lien. Making this a standard part of your accounting processes for past due payments can help with your accounts receivables. 

3. Mechanic’s Lien: If you file a NOI to demand payment and you still don’t have your money once the deadline passes, then you can file a mechanic’s lien. 

How to File a Mechanic’s Lien

What steps do you need to take before filing a mechanic’s lien?

First, make sure you have the right to file the lien. If you don’t meet all of the requirements and file a mechanic’s lien anyway, it could be deemed a frivolous lien and result in costly consequences. Make sure you answer:

  • Does the project meet the state’s guidelines where the property is located?
  • Did you take the preliminary steps to protect your lien rights?
  • Are you still within the legal timeframe to file?

How do you fill out a mechanic’s lien form?

As with any legal document, filling out the mechanic’s lien form requires complete and accurate information. Start by finding the correct form for your state. Every state’s form is different. If you download the form from a free legal form provider, double-check that it meets all of your state’s requirements. 

There are three important sections on every mechanic’s lien form:

  1. The lien amount: This is the total amount of payment you’re demanding. It should, of course, include the amount you’re owed for services provided. Depending on your state’s guidelines, it could also include filing fees, attorney’s fees, and retainage
  2. Claimant information: You’re the claimant. It’s important to use your business’s full legal name. Failure to do so could result in your lien being challenged. 
  3. The property description: While this part seems like it should be as simple as listing the property address, it’s not always. About a dozen states require a full legal property description to be included on the lien form. The best place to find the full legal description is on the property deed, which is typically on file with the county assessor’s office.  

How do you file a mechanic’s lien form?

Once you’ve completed the mechanic’s lien form, the next step is to file it with the county clerk or recorder where the job site is located. This is an important note. Do not file it where your business, the GC, or the property owner are located. 

It can be a good idea to contact the county recorder’s office to check their filing requirements.

  • There will always be a cost to file the form. This varies by location and filing method. 
  • Most counties give you the ability to file your form in person, by mail, or electronically.
  • You can also hire a legal services provider to file for you, but that does incur additional expenses. 

How do you notify interested parties that a mechanic’s lien is in place?

A mechanic’s lien doesn’t enforce itself. You need to inform everyone that it exists and then follow up to collect payment.  

  • Serve the lien: The first step is to notify everyone that there’s now a lien on the property. Your state may require you to serve the lien to the GC and property owner. It’s good to go a step further here and send a copy to everyone with potential interests, like other subcontractors, construction and property managers, lenders, etc. You can send these by fax, email, or certified mail, or deliver them in person. 
  • Contact key parties: Once everyone has had reasonable time to review the lien, it’s time for proactive outreach. Start with the person who hired you, and then get in touch with the property owner. Even if you attempted to collect from these parties before, you have leverage with the lien. They will be more motivated to pay you.   

Remember: your lien will expire. So don’t wait too long before you follow through with these actions.

What’s your last resort after a mechanic’s lien?

We’ve heard from subcontractors that they wind up getting paid at least half the time a lien is involved. If your lien is effective in securing payment, you’ll need to file a lien release or lien cancellation with the same office where you filed your original lien paperwork.

But if your outreach doesn’t prompt a payment within a couple of weeks, it may be time to take the next steps. 

  • Send a notice of intent to foreclose: This letter is your final warning that if you do not receive payment, you intend to force the property into foreclosure. You want to send this letter via certified mail to the property owner and prime contractor, plus any other parties you’ve been actively communicating with.
  • File a foreclosure suit: If the date listed in your demand letter passes and payment still hasn’t been issued (or a payment plan made), it’s time to file a foreclosure suit. For this part, you’ll need an attorney. 

Protecting Your Lien Rights 

Mechanic’s liens have the highest success rate when it comes to collecting past-due payments. So it’s important to preserve your lien rights in the event you need to use this powerful tool. This gets complicated when most GCs require you to submit a lien waiver (i.e., a document surrendering your lien rights) if you want to get paid. 

Lien waiver management can be tricky. You need to send the right forms to the right people at the right time to avoid putting your company at risk. This delicate balancing act is a big reason subcontractors use Siteline’s construction billing software. Our system makes tracking and managing lien waivers simple, helping our customers avoid payment delays and get paid an average of three weeks faster. Check out a demo to see how it can streamline payments and eliminate headaches. 

Head of Construction Solutions
@ Siteline

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